Apple Inc. (AAPL), Amazon.com, Inc. (AMZN): Five Reasons This Stock Looks Overvalued

I know that some investors are going to disagree with whatever I say about Amazon.com, Inc. (NASDAQ:AMZN). The company’s stock performance has been nothing short of amazing. However, no company operates in a bubble forever, and as amazing as Amazon is, there are big problems that just can’t be pushed aside.

We do know this is a retailer right?

I understand that it’s easy to get excited about Amazon.com, Inc. (NASDAQ:AMZN). The company offers good deals on pretty much everything that anyone could want. If you have Amazon Prime, you get the goods fast with no shipping cost, and you get the Kindle lending library, 38,000 free streaming videos and more.

All that being said, Amazon at its heart is still just a retailer. When it comes to selling goods, they compete against the granddaddy of retail in Wal-Mart Stores, Inc. (NYSE:WMT). Walmart currently has more revenue in one quarter than Amazon.com, Inc. (NASDAQ:AMZN) has in almost a whole year. In addition, Wal-Mart Stores, Inc. (NYSE:WMT) has over 4,000 locations domestically, which is more than the number of warehouses that Amazon will probably ever build.

However, Amazon.com, Inc. (NASDAQ:AMZN) isn’t satisfied with just buying wholesale, selling retail, and making money. Instead the company competes with eBay Inc (NASDAQ:EBAY) in trying to get smaller retailers to sell on their site. Since over 60% of eBay’s sales are fixed prices, eBay Inc (NASDAQ:EBAY) and Amazon have never been more direct competitors. The difference is, while Amazon hosts small sellers, eBay Inc (NASDAQ:EBAY) not only does this, but they also have a hugely profitable PayPal unit as well.

As if this wasn’t enough competition, Amazon.com, Inc. (NASDAQ:AMZN) decided to take on Apple Inc. (NASDAQ:AAPL) in the device and content business. The company’s Kindle Fire lineup, and digital sales, compete with Apple Inc. (NASDAQ:AAPL) at every turn. Amazon would say,” instead of buying the $499 iPad, why not buy our $269, Kindle Fire HD 8.9″? Instead of buying the iPad Mini for $329, why not buy our Kindle Fire HD for $199? Amazon is taking this to a new level by offering the Amazon Cloud Player for iOS, and making the Amazon MP3 store available specifically for the Safari browser.

Biting off more than even Jeff Bezos can chew

When you go after the best and brightest companies in their respective industries, you better do everything right. Amazon has seen tremendous growth, but with a stock selling for a forward P/E of almost 200, there can be no form of weakness.

The first issue facing Amazon.com, Inc. (NASDAQ:AMZN) is, their business model isn’t working the way most people think. General merchandise sales have moved from 60% of total sales to almost 64% of total sales in the last year. In the meantime, these sales have decelerated from 40% growth, to about 30% this year. The slowdown in Amazon’s most important business should give investors pause.